Diablo III's Virtual Economy About to Transform the Real One

Blizzard's Diablo III is launching today, and with it, the Auction House, where players can trade game items for real money. (Check out Blizzard's FAQ on it here.) The latest installment in a best-selling franchise (Diablo II sold 4 million copies), from a major media corporation, this will easily become the world's most prominent real money-virtual goods marketplace. We don't know how big this will be, or all the unintended consequences it will bring, but I'm pretty confident major transformations will follow. Here's some initial thoughts:

• It's a safe bet that Diablo III will eventually sell 7 to 10 million copies.
• To play the game at all, you need to be online, which means every Diablo III player will have constant access to the Auction House.
• Assuming 15% of the player base actively uses the Auction House, that means well over a million players engaging in real-to-virtual trading.
• Unlike Diablo II, which was released in 2000, Diablo III is coming out during a global recession, when millions in the developed world own the computers to play the game, but are under-employed, and have a huge incentive to engage with the Auction House.
• Given the above, I wouldn't be surprised if we see over 150,000 to 250,000 people making some, most, or even all of their real life income from Diablo III. Perhaps much more.

At that size, we are talking about a workforce larger than many real world industries, engaging in activity worth hundreds of millions of dollars. I don't know all the implications to come from this, but I definitely think we're not prepared for the impact. Watch this excellent Penny Arcade video, which is just scraping the surface from a gamer perspective.

Oh, and the image connected to this post? It's a Diablo III virtual-real money profit calculator, which someone created last year. As I said, we are not prepared for what's about to hit.

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Comments

[Kim Anubis]

This is gonna be fun to watch -- I hope you'll keep us updated as the situation develops.

[Ezra]

The implications on game design is pretty interesting too. Nerfing a sword now means much more than balancing a game, there's an economic impact to worry about. CCP might not be the only game company with an in-house economist for very long.

[Dartagan Shepherd]

We've been batting this around in D3 beta. Common wisdom among most players seems to be that it will be good if you want to pick up an extra $20-$50/month, but not something for full time income unless you're willing to put in lots of hours.

Agree though, it's a game changer. If even partially successful, other companies will start looking more at what I call a "share the wealth" model that gives users tools to make money off game and virtual goods content.

There's no better way to get a user vested than to get them vested in a real sense.

[Ann Otoole InSL]

Won't mean diddly if Blizzard can't sort their server issues out.

[Arcadia Codesmith]

I would expect supply to far outstrip demand, prices to plummet to pennies for everything except the most rare and powerful items, some really devious counterfeit exploits, and no viable income for anybody but the game operators.

[Dartagan Shepherd]

@Ann: Well, it's been a bumpy launch day, but nothing unexpected. They pretty much predicted the juggling act they'd have to do at the launch party.

The "mistake" was in selling it off the shelf as an a "buy it early" kind of deal and then having heavy downtime on mostly the America servers. While it's not the first online-only game by far to be sold on shelves, it's hard to justify spending that kind of money for a product that doesn't work for a third or so of day 1 on America servers. It should be sorted out quickly though.

I got my D3 for free as part of the early annual offering so I can't personally complain about launch day. I've waited 12 years for D3 so a few days to get the servers matching the load isn't a big deal.

Blizzard didn't design the auction house as a business tool, they designed it as a convenience to players who were having to jump through hoops to sell their content on ebay and other places.

The fees Blizzard takes out are rather hefty and there should be some checks and balances on minimum prices in the future, so undercutting should only go so far. This is something SL should have done from the beginning ... set minimum prices to stop a free market from degrading too badly. Too late for that now for them.

Still mostly positive about this one. The more companies adopt this practice the more opportunities to make money for people while they spend hours doing what they enjoy anyway. Whether it's a full blown business or just enough to pay for a night out, it's all good.

How to handle a thriving market and keep it thriving are lessons these companies will have to figure out.

[Brookston Holiday]

"This is something SL should have done from the beginning ... set minimum prices to stop a free market from degrading too badly. Too late for that now for them."

@Dartagan This statement struck me as rather bold and unsupported by the rest of your post. I'm wondering what you believe the consequences of such a price floor would be?

[Dartagan Shepherd]

@Brookston: Not sure how you mean. Minimum prices are just a simple mechanic to ensure that all content has value and that undercutting won't fall below a certain threshold. A variation of that is to make sure there's a cost of entry.

However, SL has groomed a heavy culture of freebies and free content and free accounts and the mechanics to support free, so it's really too late to remove the free aspect of SL and apply those particular balancing mechanics.

[Dale Innis]

"Minimum prices are just a simple mechanic to ensure that all content has value". Not sure what flavor of economics that is, but it doesn't make any sense to me. Artificially controlling prices has no effect on value. Economics 101 says that minimum prices either have no effect (if they're below the natural price), or lead to surpluses (if they're above the natural price).

It may very well be too late to remove the free aspect of SL; but why would you want to? The ability to share things for free is one of the things that make SL work so well, in my opinion.

[Brookston Holiday]

@Dartagan If the product you sell has become so commoditized that it no longer can compete with freebies, the solution is to differentiate your product, not to distort the market. No?

[Dartagan Shepherd]

@Dale, yes but this is not economics or an economy, these are game mechanics, SL included.

From the company standpoint, it's a tool to get around the restrictive bits of real currency and to take more money out of purchased tokens via fees and sinks.

Repeat after me, this is game design and monetization, not economy ;)

@Brookston: Sure, but that applies no matter how the market is engineered, I think. Pricing to compete is good, and didn't mean to sound anti-free. Like I said above though, this is all about game/world design more than it is about free markets, economy, etc.

Since game systems are a manufactured entity, you might as well go ahead and use the ability to create the most robust system you can. It all depends on what your goal is. To make the company money? The users? Both?

From there it's just a matter of how the "split" averages out between company and users.

[foneco zuzu]

When do some here on the forum realize that Usa market share on Second life is meaningfulness and that what keeps SL alive is the rest of the World (Brazil, Germany, France, Italy)!

[Desmond Shang]

The implications are fairly significant.

This brings up issues larger than D3, such as: what if you rob another player in the game? That's effectively real money you just took, while (potentially) he could take yours. World of Pokercraft, in a way?

Or perhaps more to the point: what if you 'gamble' in a game that inherently has a lot to do with risk and perhaps some element of luck? That's normally called online gambling and is against US law. I personally don't care if people gamble, but sooner or later either gambling laws have to change, or video games will have to 'not go there.'

This may not be Texas Hold Em exactly, but at the core, it's not just Pac Man they are playing here. Is it a big deal just because money is involved? It's sort of like the difference between spending the night with a girlfriend, or paying to do the same thing. Money can really change things.

Old issues, but the fine line is getting finer every day.